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Wednesday, February 05, 2014

Still Probing On The Downside

Stocks have opened lower again, but are currently bouncing from their lows of the day.

There were a couple of economic reports today. The ISM Services Index rose in January from 53.0 to 54.0. This should be viewed as a positive. Although investors have been crying 'the sky is falling' after getting weaker ISM Manufacturing report early this week, the services sector is a much bigger component of the economy.

Also, the ADP Employment report showed the economy added 175,000 jobs in January, close to the consensus expectations. But the ADP report doesn't always correlate perfectly with the govt payrolls report which is due out Friday morning.

The 10-year yield is slightly higher to 2.66%, a good sign that it is trying to halt its recent slide.

The volatility index again moved above the 20.0 level this morning, but has since reversed from its highs and is currently just 1% higher near 19.35.

Trading comment: The stock market sold off pretty hard again this morning. The SPX bottomed around 1739 on Monday an this morning tested those levels by touching 1738. It has since bounced sharply and is back above 1750 as of this post. We will have to see how things go by the close and if it can hold this bounce. But so far the SPX is trying to build a base at the 1740 level, and given how oversold the markets are it would not be surprising to see a further bounce from these levels. Of course, that doesn't mean we are in the clear. Markets don't go down in a straight line. But after a bounce the market often comes back down to test its previous lows. It is on that test that we often see if the market can hold of if it will continue to probe lower levels. One step at a time.

About Me

Jordan Kahn, CFA is the Chief Investment Officer of KAM Advisors, in Beverly Hills, CA.
He is a frequent market commentator for numerous investment publications, and has appeared on CNBC and KNBC-Los Angeles. He is a regular columnist for RealMoney.com and has also been featured in TheStreet.com, Street Insight, Technology Investor, and Barron’s.